Around the Horn in Wholesale Distribution - Episode 140

Sa. Sam. Hey, the twirl is back. Good to see you. Must be feeling better.

I don't know. I just. It was. I was due for it, so had to. Had to give you something to talk about, you know.

Right. That's right.

Good, good, good morning, Brooks.

Good morning.

Great to see you. Thank you for being with us, Mr. Burton. How are you today?

Doing good. Some good stuff to talk about today. Looking forward to it.

Those flash floods were warnings yesterday where you live or just warnings? Right.

There were warnings. And hey, we had some, like, sprinkles on the ground this morning, but no flash flooding, so.

Yeah, very good, very good. Brooks, where. Where are you based? I forget, you in Austin?

I'm in Austin, Texas. That's right. I thought, okay, we had sprinkles here yesterday.

That's awesome. Did you have a flash flood warning? Warning?

Oh, no, just a warning that there might be rain at one point in the year.

Okay.

All right. Well, we were. We had. A couple of weeks ago, Tom and one of our software developers were on a phone call and my phone started going crazy and my watch started vibrating with an alert. In about three to five seconds later, we had an earthquake. So the. The alerts worked quite well. I was very happy that first time that I experienced that in an earthquake here in California. So anyways, I don't think that's why people are here today. So let's dive right in. I. Kevin. I'm Kevin Brown. This is my lifelong friend and business partner, Tom Burton. And we're joined today by the illustrious Brooks Hamilton. And we're going to dive in a little bit to what Brooks does before we get into the news today. But we get together every Friday Morning here on LinkedIn Live, YouTube Live and Facebook Live. And then later in the day, all of the discussion that we have gets edited and produced and put into all the podcast formats. Apple, Spotify and so forth. And we talk about the news of the week that went on both in North America as well as globally. But not just the news, but we try and unpack that news and really kind of look at how it impacts wholesale distribution and manufacturing. So if you're in the wholesale distribution and manufacturing space, this is the place to be on Fridays or listening later on the recording. The reason I define the difference between those two is that if you are listening in, in the recorded podcast, you won't see these three handsome faces. That's the first downside. The second part of it, though, is we publish a newsletter every week. It's called around the Horn in Wholesale distribution and manufacturing. And that's what will be up on the screen today with some charts and graphs here and there. And so if you're listening versus watching, yeah, you won't be able to see those, but you can go back anytime and watch the recordings on YouTube on the lead Smart Technologies channel there as well as on Facebook or LinkedIn. So about that newsletter, if you don't get it, shame on you. To start with, we got to get it to you. So the easy way to three easy simple ways to to request that. One is you can send us an email@helloadsmartech.com and we'll get that right out to you. Two is you can jump onto LinkedIn if you're active there, just search around the horn and wholesale distribution podcast and you'll see the option for the newsletter will be there and you can request it there. The that way it'll come to your LinkedIn feed and to your email each week or third, we have a website for the podcast, it's called www.aroundthehornpod.com. you can find us there. Last little bit of housekeeping related to that is if you like the content and you're with us on a regular basis, the absolute best thing that you can do to be of help to us would be hit the subscribe button if you're on YouTube. If you're on LinkedIn, just follow the Lead Smart Technologies page there and you'll see all of those updates. If you're listening on the podcast platform, please leave a review. Give us a nice thumbs up on that setting and that'll get this message out to other people. We couldn't do this show every week if we didn't have the sponsorship of the company that Tom and I work for, Lead Smart Technologies. At Lead Smart we've developed a product that we call the Channel Cloud which is an AI enabled customer intelligence on CRM solution solely built for wholesale distributors and manufacturers. So we don't work with school districts or dental offices or construction companies like traditional technology companies would sell to anybody. We've developed a solution solely and specifically for wholesale distribution. What that system does is it what we use the term is it corrals siloed data from across your organization which gives you never before seen data that's actionable to really uncover opportunities and potentially even risks within your business to help you accelerate growth and understand your business better. So if you're a wholesale distributor or manufacturer, you're digitally transforming, would like to bring some AI and some other relevant technology into your business to help you grow. We would love nothing more than to talk to you. That is, I think it. Mr. Burton. What did I miss?

Just wanted to say good morning to Bob and Will and let them. And thank them again for the GoFundMe account they put together. I have a whole new audio and I don't expect that I will lose any loose again today. So I wanted for funding that for me.

Yeah, Brooks, to bring you up to speed on that a little bit is we're at episode 140 today, which just astounds me. This is either really good or we're really dumb. It's one of those things. But with that is for the last either way. Yes, that's right. That's right. It's either brilliance or insanity or maybe a little of both. But for quite some time, Tom has had intermittent interruptions to his audio. And so at first I got so frustrated. After months of it, I sent him a new cord because that's what we thought he needed and it didn't help. So these two gentlemen, Bob and Will, both were suggesting that we break out and buy him some new equipment. And I think it was Bob that even one of them suggested a GoFundMe account for Tom's microphone. So the next day after that I was like, that's enough. I went on to Amazon and Tom woke up on Saturday morning with a new microphone at his door.

It's like Christmas.

Yeah, there you go. There you go.

Good will for it to happen.

That's right. I was embarrassed at that point. So, good news. So why don't we. Why don't we kind of dive into the news? So every. Every week, if you're joining us for the first time today. And I think I saw some registrations from people that were coming. I think today I saw four countries, I think, that were going to be with us live, which is great. I know there's quite a few people out there in the UK and other parts of the EU who I'm assuming have their evening cocktails maybe with us and log in. But we cover a series of different topics in the newsletter. We start each week with the economy and supply chain. We move into manufacturing and distribution and E commerce and marketing, and then we'll kind of go into some sales and M and A stuff and talk about AI and technology. But before we dive in, Brooks, would you introduce yourself a little bit and your company and what you do and why you're here and all of that fun stuff?

Yeah, yeah, you bet. First off, thank you all very much for Having me on this and it's our, our second shot of getting together. I can't tell you how thankful I am for joining.

We appreciate you being with us. Perseverance. We all made it.

Perseverance.

By way of background.

Our firm focuses on working on AI executive alignment exclusively within distribution and manufacturing. We have a focus on that and that really comes from our team spending the last 20 years working on the last round of AI improvements for distributors and manufacturers. Logistics organizations provide primarily in sales effectiveness and pricing. So what we focus on with organizations is getting alignment of the executive team within their AI strategy. What are we going to go do? Get a plan together with the CIO and then help with those first few activities of this is how we get started. And that's for organizations that are everywhere from 5 million in sales to 5 billion in sales. But we really love working with small medium sized organizations mainly.

Is there any particular part of the business that you tend to start with? Do you tend to start more with the front of the house and the operational side or the back of the house and the supply chain or does it depend on the business?

Well, I would say about nine months ago there was a lot of focus on what can we do on the sales enablement side, how do we smooth customer journey aspects. But, but just due to the news and I think a lot of things we're going to talk about today, it's really shifted to supply chain. How do I make sure that my people on the supply chain team have sufficient bandwidth to go handle all of the price and inventory changes that are coming from the tariff disruptions. So we focus on things like how do you smooth your non stock process, how do you go about making, researching, how do you more easily research non stock items or specials and helping organizations free up that productivity to focus on the needs that are urgent right now.

So AI is being used a little bit of a triage of the whole tariff situation and all the other fun stuff that we're dealing with at the moment.

It is and I think about there are some things that AI is great at, there are some things that it's not great at. When we look at things like finserve applications, how well do I move exact numbers to exact numbers that could be so. So. But when you think about things like translating something that's really complex like tariffs and legislation down to activity, what do I do? What does it mean? What does it mean for me today? AI is great at those things. So you know we're trying to lean into the things that are great and fast and prove out value without making a big investment.

Early wins, right?

Early and easy wins.

Yeah, that's great. Very good. Well, this is going to tie in well with your background and experience, which is why we wanted to have you with us to today's discussion. So we're. Why don't we. Tom, why don't we kind of dive in. We've got that first article from Modern Distribution Management research shows tariffs growing impact on supply chain. So I think what we're seeing now, right, is we've been talking about tariffs for months. Then the beginning of last month we had our big announcement of tariffs around the world. Surprised a whole lot of people. Specifically, I think it really surprised a whole lot of people in the distribution world who historically have relied heavily on China but then had started moving over a number of years. I've talked to three or four people in the last month or so who had been working to migrate a lot of their supply chain out of China, have a little less reliance. But of course that went to Southeast Asia. I don't know for sure, but I'm going to guess that maybe some of those folks even probably had a new name in Southeast Asia, but the same Chinese company behind the name in Southeast Asia, but they were out of there and they weren't anticipating on was it Liberation Day that all of a sudden all of Southeast Asia was going to get hit. Not to the same level as China, but big impact and it got a lot of people scrambling. But I think now what we're seeing. We'll talk about this with this article and a few other discussions that we'll have today is the rubber is starting to meet the road, so to speak. Right. The impacting and so forth. I've got a couple of examples I can share today. But you know, either of you guys have any particular thoughts on that first article?

Well, it's not shocking, right. I mean there's, there's no doubt that there's going to be impact and it's been what now, three weeks or so, three or four weeks since the.

Yeah, it's been basically about a four weeks. I guess it was about a month. Yep.

And then all the. So I mean it's not, it's not surprising. I'm. And maybe Brooks, this a question for you. Is the challenges right now really from the tariffs or is it from the lack of the certainty and the uncertainty. Sorry. And the confusion that is being created that is causing most of the problems now versus the actual disruption of the supply chain?

Yeah, I feel like it's a lot more the latter. And how do you go through the planning activity? You know, lots of people have, lots of organizations have ERP and other types of planning activity, but very few people had tariff. Like how do I go about translating a tariff in order to understand the impact on my company and pricing and margin and it's a huge gap. So when you don't have something that gives you visibility into the impact, best thing to do is pause and look around to see what your options are. But even the options are unclear. When you have very high tariffs against Vietnam and other spots in Southeast Asia, that just becomes a bit of a planning giant headache that is dominating conversations in supply chain and exec teams.

I think, you know, to add to that, I think that The P&ERP of the planning component has probably historically been one of the weaker components of that. Right. And so now you put in something like tariffs. It's like, well wait a minute, I can quickly get a look at something if I say, if I move from supplier A to supplier B, these are the ramifications in my business. But now when you say I've got 145% increase from everything coming from that country, I need to be thinking about another country potentially. I don't think, you know, and we're probably let either one of you happily throw a rock at me if I'm mistaken. Yet I don't know that we fully have the AI yet to do a good job of that. Fully built out tools and certainly if they're there, they're at very few wholesale distributors.

I certainly agree with that. Like we see some tariff management packages from large providers, but those are really for a very few large customers. So even if you have an idea about how to get tariff information from the macro, it's very difficult to then tie it in which of my vendors and which of my parts from which my vendors are going to experience cost increases. I think the point you made earlier, Kevin's a really interesting one about ERP and the P part of that. It kind of speaks to a missing application layer that we're beginning to see the need for again, which is we have ERP which helps us with system of record warehouse management same. But then I need to move up to how do I complete an end to end task across these applications that's been missing. And I think part of that is just we haven't had a big impetus for it like tariffs. We also various components of it like trying to integrate all of those things together is horrendously expensive. But I think we're beginning to see both of those things change today.

Do you think that this, the tariff planning, regardless of what occurs here, you know, over the next whatever period of time, do you think that that's something that you think is going to stay and be a key part of the planning process or and maybe going beyond tariffs, but really just the overall planning of where the. We've talked a lot about this. The disruptions can occur or do you think we'll just kind of go back to where we were before?

My guess is we're in for years of supply chain rework as the geopolitical factions kind of further solidify. And more, there's an increased push to reshore manufacturing in case there's conflict between those groups.

I want to hit Bob's comment. I want your take on this too. It's interesting. He's saying tariffs can be a boon to companies that are operating in a lean fashion and have simpler supply chains, larger works have sunk cost, early stage SMBs can really get a larger a jump on competitors in this environment. What do you think? Do you think that's. That's an opportunity for some of the smaller players.

That I, I think it's going to be really tied to where's your product coming from today?

I would say that also ties into discussion we had a month or so ago a little more than that with John Gunderson from Electrical Trends. And John was making the comment of, you know, while this isn't good for anybody per se, but the person that is well structured, well organized, it has the right technology in their business, has great inventory management in place and a strong balance sheet can leverage this a lot different than the people with risky balance sheets. I'll just say, and maybe that, you know, I mean there is, I think once, once we get to a. I don't know what the number is, I'm just going to throw it out there and say 75 million plus 100 million plus dollar a year distributor. They have to have the right infrastructure in place or they wouldn't be able to continue to grow it probably the way they got to where they're at. But when you start seeing probably some people in the sub 50 million dollar, I don't know what the right number is here, but sub 50 million dollar range, they're not managing cash as often, maybe as well as some of the other companies, certainly when you get down in the 25 and below range. But John's point was that, and we've talked about this again was if you've got really good inventory management solutions, strong inventory positions, a strong balance sheet which gives you the cash to that where maybe you could have purchased well and now you start introducing to the market a blended cost versus here's my 145% increase or I'm, you know, maybe my there's 145% increase but maybe your factory is taking 25% of it. Right. And you're going to eat another 25% of it. But you still have 95% increase to put out there. Companies with strong inventory planning and strong inventories and strong balance sheets, which is what it takes to do that could make hay. I mean I think that's a little bit of Bob's point here is you could kind of see the light at the end of the tunnel for some of those types of folks.

Makes sense.

Good. Well, this before we, before we jump. Go ahead Brooks.

One other response to Bob is I do think that organizations that are small and nimble do have an opportunity here and one of them is assessing what your competitor's situation is because some of your competitors, let's say you are primarily domestic sourcing. That might have actually been a negative for you from a pricing position before that could flip around. And this is a time in order to really go to the wall in order to push on some of those competitive situations where maybe a much larger company is sourcing 80% of their goods from Asia. Now it's time to go have those discussions again and having a good system, maybe even a CRM system in order to go push those boy, that's a powerful story of market share.

Well, yeah, that's a great point. Right. I would suggest adding that a smart CRM versus a CRM and. Right. And that's what we like to talk about at Lead Smart. But Tom, it just makes me think about what some of our customers at Lead Smart are doing.

Right.

Is they're they're leveraging AI they're leveraging both marketing and sales to come together to evaluate which customers they should be talking to about specific things. Hey, good to see Jason here.

For jumping on late. I don't know.

We're trying to get Jason to come on the show with us. We're going to convince him one of these days. He's a busy guy but glad he's with us today. But so interesting discussion before we jump off of this and we'll kind of COVID hit these others fairly quickly. I think there's an and I'm going to throw this out to you both and Throw rocks at it if you want. But I think this might be also an interesting time. I just, I'll just use this example because I was talking to a distributor about it a while back. We're also in a place, and I just noticed yesterday a good example if, you know, you work within the industrial distribution arena and a couple peripheral arenas with that is, you know, the big player as a wholesaler is ORS Nasco, and they've been out doing some acquisitions recently. And their role in the marketplace is to support either smaller distributors who can't either get a brand and would like access to it, but. Or give them access when they just need a brand that they maybe don't stock and obviously a lot of other things that they bring value to the table in. But now all of a sudden, if you start thinking about, I used the example of a while back of the guy that decides that he wants to go into business, into distribution, who has a barn that he's not using in the middle of a field, can go put a stake in the ground with a starlink connection on it. And assuming he's got good credit and a little bit of background on the things that go with that, could go get an ORS NASCO account. And now all of a sudden we're looking at a marketplace where that 5, 7% difference of him versus the big player in town, it really doesn't matter to the same level that historically that 5 to 7 points, maybe 10, 12 points, whatever it is, that's a, that's a barrier to entry. Now all of a sudden when people are thinking about we've got to go raise prices 20, 30, 40, 50 or more percent on some things. The smart guy could maybe enter into a marketplace if he can differentiate with service levels or, and not just ors, but plenty of other wholesalers out there will drop ship.

Right.

There could be some really unique people popping into the market right now too.

So what you're saying is like, this is not just a supply chain disruption moment. This is really also entirely shaking up the pricing environment. And because you have such a very dynamic pricing environment that may allow either an opportunity for rebid or for new entrants into that market because of the very fluid situation.

Yeah, I don't know how many people out there would have the guts to go do it right now. But the point being is, historically, right, getting entry into a marketplace is very difficult when you have very narrow margin differences, and I won't say margin, but pricing differences into the marketplace. But when now everybody is raising prices that difference maybe doesn't matter as much. And I think really what I guess maybe my point is more is that the smart people and it doesn't matter if you're you know, a 3 million dollar wholesale distributor or 300 million dollar, your wholesale distributor, smart folks that can manage money well and you can have a very strong solid balance sheet as a very small distributor as well. If you run your business well, the people that are running their business well using technology. We're going to talk a lot about today and we'll get moving forward here. Talk a lot today about technology and AI and the things that can be be done. But there are a series, I guess maybe Brooks, maybe this would be a better way to put it. There are a series of factors right now on Friday morning, May 2nd 9:25 Pacific that we haven't seen before. Right. AI is accessible to everyone today.

Right.

Pricing is goofed up for everyone today. The smart people I think can leverage that to their advantage. And I think we might see some potential shakeups out there of who's not as strong as they used to be and who's was maybe a little smaller that now is a little stronger.

Yeah, yeah.

Well some of the best opportunities are in the time of turmoil and chaos. Right. So that's. There will definitely, I'm sure be some. The rise above the crowd.

Yeah. So anyways Tom, let's kind of push through some of this. But basically the, that the factors that that first article we're talking about that there's distributors. This was MDM's research with a survey of 200 distributors. NAW and MDM did it together. 48% are slowing inventory replenishment, probably because they pushed so much in the last couple months to get inventory in. 40% are delaying new hires. 37% are cutting capital investments. Don't do that. Buy technology, Everybody buy technology. 60% are reducing discretionary spending. So I think this is a little bit. It should be expected I would guess in that setting. Right, of course you're going to do that while you see where things fall. Next article we talk a little bit about. We can kind of skip through that, Tom. Wholesale inventories up half a percent. But this is interesting. There's an article here about China's factory activity contracts as tariffs darken trade landscape. Kind of a. No duh. Right. It's, it's just like the shipping that's going on out there right where they're expecting next week to start in the ports of LA and Los Angeles. Brooks, Tom and I are about two And a half, three hours apart from each other. And LA Long, the Port of LA and Long beach are dead center in between. And Tom and I both grew up together in Long beach right by the port. So that's the one we reference quite often but because it's on the local news. But 33 to 35% was the expected reduction over the next couple weeks of things coming in.

Interesting. I wonder how much is flowing to ports in Canada and Mexico.

Well, what they were describing from the CEO of the Port of LA that I saw an interview with last week, it's not about where they're going, they're not coming. So it's the reduction is what was on the water is hitting. They're not leaving, they're not leaving China. And I'll give you guys both an example. I was talking to a good friend this morning that's in earlier in the week I should say that's in the low voltage electrical market and he's broker, wholesaler made a killing Pre Covid knew a handful of the right people that let them let him know when the factories were going to shut down and what inventory was available to him. And he did a really nice job by being super nimble in a small business. But he, he's got, I think he said five containers that are sitting there because they couldn't get him out of the country fast enough to get here. And now he's looking at that with his commitment. Customer doesn't want it at with the tariff price increase of course. And the good news is the customer was like let's find some balance for all of us and see if we can get this stuff. So I think it's nice to see end user customers, distributors and manufacturers right now. This is a time that really people have to put their heads together in partnership and I think it's going to be a downtime for. Because I've heard some examples, a few examples of this from a couple distributors of some manufacturers that even before the Liberation day were instituting some big price increases because they thought they could, not because they had to. I think those people are going to get a lashing over time and people are going to remember that. But right now there is a whole lot of containers sitting in Chinese ports not getting put on ships to come here. And I think that's where we're going to see the big, the big port slowdown until something, you know, something's got to break loose in all of this. Right?

Well it's hitting them first. Right. Their source or the source is getting hit first. It's pretty. If we talked about last week and what these articles talk about, I think these numbers are probably even, probably higher than they really are in the PMI index for the, for the Chinese side.

Yeah.

So yeah, it's, it's, it's, you know, obviously there's going to be the trickle effect over here, but it's going to hit them. It is hitting them first.

Yeah.

Along the way.

So it's great, great, great comment from Jason there. I could almost argue he said, do you foresee shipping costs reducing because those lower volume. So one, I'm interested in Jason's thoughts on this too, and either of you, but here I'm going to throw this out. I think that could go either way. I think you could see prices stay up because it's not going to matter by lowering them because there's not enough price traffic moving. So I can see them staying up or I could see some people going in. And the other side of that coin is yeah, let's drop our shorts on this to get any business that's coming out. I think you could argue it either way but I mean, what do you guys think?

Yeah, I don't know if I have an opinion. I think it could go either way to the, to the person there. I would suspect that it might drop lower in the short term, but whether that's a longer term play, I don't know. But I think as we leave here I want to just make one comment and then we, I know we want to get onto the technology, right? Think about even a month ago, none of us and just think about even society, right? None of us was talking about this and all the China impact and what was coming from China and the products that were getting for.

We just box business as usual.

This is business as usual. Think of the awareness now that we have as a. Not just in the manufacturing distribution, but as the consumer, right? The awareness and the thought of where are these products coming from? What are the impact of them? I think we're going to have a double whammy here because I think obviously we have the issue of the distribution and people not wanting to pay the tariffs but if we have a slowdown of what people are purchasing, that's one plus one equals three or four in terms of impact and all of that's going to go back here. But we've never, we never really thought much about this as a society and I don't know that's now everything anybody wants to talk about, whether they're in the Industry or not. So it's, I think it's going to be a healthy, I think that's healthy for us to. Whether we agree with what's going on. I think it's healthy for us to understand sort of the repercussions. I mean most people, the word supply chain would be like what are you talking about? I don't know what that means. Right. A month ago or.

Well, except for they learned a little bit about it when they couldn't get toilet paper at Costco a few years ago.

The toilet paper supply chain.

Right. Yeah. No, I think that that's an interesting point, Tom. You know what to go with that is maybe I should be embarrassed to say this but I think we're also all getting a history and civic lesson with it as well because I mean I, I didn't know that what was it, 1913 I think was when we instituted taxes in the US and we had been basically a tariff based economy prior to that. I, I wasn't aware of that. You know, I think so. I think we're learning and it's interesting regardless of how you feel about, about this administration is, you know, there and Bob made a comment right. About you know, the administration's view of this is, you know, shutting down China's IP theft and quality issue, product dumping, currency manipulation and really just trying to make things fair. Now I think what we're seeing is this while the big, the elephant in the room is China is it's impacting a lot of other countries that, that are going to go along with this. But I, I think. Well, I'll just say this again, right Brookside, you might not have heard this but this will, this, this administration could potentially go down in history as one of the most consequential administrations of history either to the positive or the negative. This is a hero or zero moment. Right. So anyways, good. There's a few other articles as we jump into manufacturing distribution. There's a good article there from mdm, some practical things about the distributors can do successfully manage tariffs. But I wanted to shift into that second article there Tom, and talk about this a little bit. This is from our friends at Digital Commerce360 Manufacturers shifting from forming digital transformation to executing. And I think this will kind of launch us into a little bit of our discussion today on technology and AI and really getting some benefits from Brooks expertise here. But we were having a nice discussion before we went live today about what's really happening out there and so forth. And I think we're getting to a place. Now let's take tariffs and supply chain issues out of the discussion, but we really are getting to a place where people have to stop talking and start doing things about digital transformation. So thoughts from either of you on this particular article?

Well, I'll ask the first question for Brooks, right. If you take tariffs and the whole all that part and push it aside for a minute, supply chains, tariffs, put it aside from it, what do you think then is the next most important driving mechanism for these companies to actually take action with more of a digital transformation rather than, you know, dropping in point little point products here and there? Is there another impetus above and beyond what we're dealing with with the supply chain?

I, I think so. Coming from the tech industry and focusing on the what large venture capital firms are and where they're placing their money, what their bets are and what some of their theses are, I think it's really great to go back and read something like General Catalyst has been. They're a very large venture capital firm, west coast. They have a thesis of businesses have a tremendous amount of personnel overhead and are not using the tool sets that are available to them before or today in order to be more efficient. So they are buying small businesses and stitching them together entirely redoing their processes so that they're AI first in areas like hoa. So nobody really cares about what's going on in hoa. All practice. The intent is they're raising multi billion dollar funds in order to go purchase much larger companies like distributors and manufacturers and logistics organizations and then they will essentially run the same play that they ran in taxi services in Finserve, kind of go down the list. But they see this as a confluence of much more focus on US industrial economy from administration, pairing that with freely available money to go invest in what's called AI. All of that is going to result in new competitors entering the market over the next few years and I think distribution should keep their eye on that in order to understand and get themselves ready to compete against those new entrants.

Well I think that's a great point that you bring up. I think there's a component that goes with that too, right? If you are family owned business. Right. Well let's just take already PE owned businesses out of it maybe. But if you take the independently owned family owned, employee owned organizations and you start looking at that, it's like okay, I need to do one of two things because there's only one of two options, right? I'm either preparing myself for to be acquired or I'M preparing myself to run the long run. Run the long race, I should say. Right. And so I need to prepare myself digitally regardless of what those are. Because factor one is if I want to be acquired and I want a good multiple and I and the people that are out there. To your point, Brooks, whether it's this general catalyst or QXO that threw the first big salvo into all of this recently, right, if we look at those types of people and they're thinking AI first AI enabled with those companies, if I'm not doing that, I'm gonna, if I get bought, I'm gonna get bought at a lower multiple than the guy down the street. And then if I, my I'm an employee owned company or family owned, generationally owned company and that's my intention. We talk to those people every day that run great businesses and they're multi generational. If I want to continue to compete in this market, I need to be ready to compete against the guy that sold the PE because of, and got a high multiple because of the technology backing. So am I recapping that fairly precisely?

Okay, totally Neely.

And I have one more thing I'd like to. So what I'm hearing you say though, Brooks, is the opportunity or what the PE believes is the opportunity. Is it to remove maybe reduced headcount, reduced expense and replace that with AI, or is it how do I use AI to take what they have to get the double or triple productivity so that we can grow without added expense? Or is it a combination of both of those things? What is their playbook predominantly in these other industries?

In the other industries, what they're working on is consolidation of very slow moving tasks. So fair amount of things that are paperwork heavy or just where I have to go pull from system, system system process optimization.

Not just people optimization.

I'm a much bigger fan overall of the growth opportunities. There's so much to be done in smart prospecting. Like one of the first like little apps that we worked on was when we first got some MCP servers working. We said, hey, this is my territory. I'm a excised distributor in H Vac. Go find who the prospects are in this area. Then I want you to make a map. I want you to tell me what products in my catalog they're most likely to buy. What are their most likely objections? How do I overcome those objections? Those, those tools alone I think are great for building out sales. And you can go build out, you know, building out sales, increasing win rate is the number one investment to Go make like mathematically it's like that's the organic growth.

Right? We talked about that for the last two weeks. And that's if you can really increase that out organic growth now, you have way more room to deal with the supply chain problems and the pricing problems and all of that stuff because your margins are going up and you have more room to play and that. And I, and I see this, sorry, I get all fired up about it because I live it every day with our customers is I see so much opportunity for that organic growth. And it's, it's a weird thing. It's almost like in some cases there's a, they're a little bit like trepidate. Well, I don't know if I, they're almost like ashamed that if they go do that, they're doing something that's going to be non personal or not good for the customer. And I disagree. I think if you can provide more value to your customer and more opportunity your customer, you're going to build and tighten that relationship and you're going to build that organic growth.

Yeah, well, I mean, that's a great point, Tom. I mean, it also ties back with what, you know, we've talked about a million times is, you know, with B2B buyers, 62, 68, whatever the percentage, now are millennials. Right. Probably a little less interested in donuts with Joe the valve salesman that is 58, thinking about retirement. There's a gap between those guys now. Right. And but what we see regularly, you know, in conversation is, well, we want to move forward with technology, but we've got this group of people in our company that probably won't do it, so want to use it. So maybe we take a step back and kind of hold off on that because we won't get the right adoption. And really I think the mindset needs to be is if, let's just say it's 68% of B2B buyers or millennials, isn't it safe to say that the people that you need to go hire are going to be the same and so what do they expect you? So every time that comes up in a conversation with me, talking with a prospect is I ask them flat out, have you interviewed anybody in the last year that has asked you about what technology you use in your business? Every one of them says yes. And it just completely shifts the conversation. Right, because you're saying, well, wait a minute, I have people that might not want to use the technology. And we're a people first. We use family to describe Our, you know, people in our company and we see that all the time. Right. And family is great. My, my conversation with people about AI is don't worry about replacing people.

Right.

Worry about keep your head count the same. But what if you could get and we, we talk with people about this because we can show them in their business with our technology is, you know, what would it do to your top line in your business if because of visibility you closed 5% more of the quotes you did than you did last year? Well that's multiple millions of dollars of business on sometimes we have one customer we're working with right now talking about this is on a $60,000 technology investment. If they could get 5% more of the quotes closed in the previous year by using AI to just remind their people about those quotes, it's a 20, 30x times their investment. Right. But it's that sometimes it's that mindset of well I've got some guys that aren't ready for this. Well what do you do? Wait for them to retire and then, then go do it and. But then you missed some good hires because you have a 20 year old ERP system, no AI in your business and you've never really closely even evaluated a CRM, let alone a smart CRM or other warehouse management tools or whatever. So we're in an interesting place right now that it's, it's, we're, we're starting to hear. I'm gonna get off the soapbox in just a second here. But you know, we hear some people talking right now about well, is AI table stakes? You know, do you have to have it in your business? And I hear people constantly saying yeah, it's table stakes. And I don't agree with that. I think you putting a plan in place and understanding AI and having the built into your business, that's table stakes right now. Because there are people out buying technology that has AI built into it, but they don't know how they're going to use it and they don't have a real plan.

I think there's a couple of good points here from Jason and Bob kind of dovetailing here. I agree with Jason about, and we're trying to do this more. I don't think we're doing it enough. I just is that we need to have more of an educational component agreed to and I think actually in some of the AI, maybe even some of the AI, you know, shows and in conferences and things like that, I don't think we're really doing enough to go Deeper on that education and understanding on what it really means and in different parts of the business that are there. And so I think that's we do and Bob was saying the same thing, right. We have to, we have to provide. We have to get the customer to better understand the value of what we're doing. So I think we have a, we as the vendor and the consultants, whatever, have more of a responsibility to do on that. I think we're probably that will change because I think a lot of it was hype driven for the last year or two. You know, look at all the shiny objects here. And now there's some fundamentals.

Right.

You talk about Brooks AI first. Right. What does that mean to an organization? What does educationally, what does that mean to be AI first? I don't think anybody can answer that or very few can answer that question.

Those were like 15 awesome points.

Bob. Thanks Bob and Jason for those comments. Really appreciate those.

Go ahead, Brooke.

So one, I love the human resources aspect to this. This to me is like it. That's maybe the now part asking people, how are you all using this? How do you plan to use this? How does your hiring plan change? How does who you're profiling go about changing? But the, the when people talk about, I am concerned about my experienced members of the team not adopting this. I, I often think of like, well, did you have the right solution in, in place then? Are you asking them to go do things that are making them less productive and is that why they're pushing back on this? We have so many more tools in our toolbox now in order to of how you can interact with things. So for example, like we went on a set of ride alongs recently and to get to know a client's business at the end of it, what we would do is one of us would call the other one hit on the transcribe button and one person would ask questions, the other one would answer as a debrief for what we did and then close it out. Great. Now we can use that transcript directly within the rest of our processes. That was pretty low touch. Nobody had to touch a keyboard really in order to make that happen. They were just having a discussion. So what are ways that we can use the AI tools we have available today to fit into the way people want to work rather than trying to push them into things that feel unnatural or uncomfortable for them.

And I've heard many times with prospects and end customers that, well, we don't want to micromanage our sales team. We need to give Them the freedom to be professionals. And you know, and I think it's a disservice to both, it's a disservice to the company and it's a disservice to the employee. Because to your point, Brooks, there's so much that they could, there's so much more that they could achieve. Right. With some even simple low hanging fruit.

I feel like it's an insult to their sales intelligence.

Yeah, it is. And, and, and to the future of their, their organization and the other people existing in the organization. Right. I mean, I, I, I think about it. You know, before we went live today, we were talking about just some of the AI related tools for order entry. Right. Because the wholesale distributor gets, you know, I mean literally pictures, pictures taken.

Yeah.

Of a piece of drywall that's got a bunch of stuff written on it that they need. Right. To an Excel spreadsheet, to a, you know, EDI transferred order or whatever it might be. And lack of a better way to describe this, I'll say a lot of these organizations, they've got Judy and Judy's been there for 15 years and Judy does this manual task every day. But nobody's really spent the time to really know how much Judy knows about this business. She knows everything about the business. And if we could take Judy and take that intellect that she has and that wealth of experience and the file cabin in the back of her mind that she knows about all these customers, use that to feed some technology, let the technology do the, the manual component of it. And we've just, and all of a sudden we've just 3 or 4x to the value of Judy. Judy probably can get paid more now and probably loves her job even more because there's all of these factors that just came together that we've really enriched her in general and if we could start looking at things from a standpoint of and I, I literally, I, in fact, Tom, I haven't even told you this. I did this the other day and I want to refine the prompt and either of you have suggestions? I went back with just with Chat GPT and I use multiple AI tools. I asked ChatGPT, I think I did this on Wednesday. I said based upon our conversations of the last six months, your knowledge base of my company, which, you know, lots and lots of GPTs built and me what is your estimate by day, week and month and the last six months of time that I've saved through using you and I should go pull it up to tell you it was, it shocked Me, but it's, it's days and days and days that I have recaptured. So now if we think that was super simplistic now if we start thinking about into an, a wholesale distributor and you start looking at it sales, marketing, operations, supply chain procurement, all those factors is what if we could 3x all of the people that we have what happens in our organization. So anyways, if you guys have a better prompt, tell me after the show. But it was astounding to me when it came back when it was pretty precise in showing me the details of what it had done.

Do you have the impression that most organizations that, that have copilot like Microsoft offering what percentage of people do you think use it for real productivity saving? Rather than complete my email text, I'll.

Give you an answer. I think people use it as a novelty for a period of time or they might use it for some, you know, things like that, but then it just falls away. I mean I, I look at, we had, we just got co piloted teams showed up I think recently and it's like God, there's potential here. But the things that they're, they're allowing me to do are just not, they're not moving the needle.

Well, it had some very generic agents in place, right?

Yeah, very generic and they kind of clunky and you know they're, they were, you could tell they were kind of put together quickly and, and stuff like that. So I don't know Brooks, if that answers your question.

But yeah.

You seeing the same thing?

Yes.

Yeah.

Probably the most common thing I saw was people use it a year ago, saw what was there, got frustrated, thought there wasn't any value stopped.

Right? Yeah.

We jump to conclusions quickly. Right. As to whether or not it has value to us and then we write it off. And then what we don't realize too is the world continues to change. Right. So it wasn't valuable then, may have some value now, but improvements in the.

Models and everything else too. Right?

Yeah, we're so I think as consumer technology consumers we're used to a certain pace of change which is not super fast on the enterprise side. And now what we're seeing on the AI side is this thing is moving 10 times faster than Moore's Law. So the capabilities are zooming up, but we don't see those capabilities translating to me over to productivity numbers. And so we have these giant capability sets and neat things these models can do. But trying to get that out into the organization has I think been a real challenge.

I would agree with you and you know, there's not only the challenge component of it, there's some risk that goes with it, I think too. And I've talked to the handful of organizations who have either bought across their organization, a company or corporate version of Chat GPT or another tool, and it might be that just, it just showed up for them in Copilot within their Microsoft subscription, zero guidance instruction, or most importantly, guardrails. Right. So now when I mentioned the risk component of that, we're looking at this from a standpoint that says, okay, what, what data of ours do you feed into this? You know, because it's popping up in Excel, right. Where you've got really sensitive data there on an ongoing basis. So I think it's a, it's, it's a, it's a. To your point. I think Brooks, on that, from that standpoint is a lot of people have toyed around with it and are playing with it, but I've yet to re. I don't, I don't know anybody that I've talked to that has a really clean and definitive deployment with guardrails and expectations of whether it's Claude or, or ChatGPT or, or Gemini or, Or co pilot.

Yeah.

Haven't seen it yet.

Yeah. Yeah. So much of what we run into is organizations trying to determine what is my AI policy. Can we get our exec team on the same page and working off the same set of facts? And then where do I start with low risk, low investment projects to get people just at least understanding, ramping up and a little more excited about.

Yeah.

Oh, Will makes an interesting comment there too about, you know, my comment about Judy is that a lot of people in that setting are running around worried they're going to be replaced by AI. So there's a, there's a human component of all of that as well that that goes with it. And I'm sure that's probably something you do when working with your clients. Brooks is, you know, what, what are we. How are we rolling this out? Right. And it mean ties back to. As simple as you even thinking about a CRM solution. Right. Is historically, those have just been Big Brother solutions. Nobody wants them because I'm supposed to type a bunch of data in and my boss never looks at it, so it's dumb. That's the play on that. And if we, we have to run the risk of doing the same thing with AI.

Right.

Of just what, what's in it for me is never there. It's. I always say that. Right. The world's most Famous and important radio station waifm.

Right.

What's in it for me? If we can, if we can show people the value to them, right? It's going to make your job better. We're not replacing you. We're going to make you better and stronger. It's like we're of the generation of. I don't want to put. Don't lump you into that, Brooks. I don't know how old you are, but Tom and I grew up watching the Bionic man and Steve Austin, right? We can, we can rebuild you. We can make you better.

Right?

And so he. Bionic man could do what other people couldn't do because of the technology, Right?

Yeah. And I know we need to move on, but I'm just, I'll just say one, hopefully, one last thing here is I, I believe, and I'm seeing this even with our own product, right? SAS products or, or traditional technology which has, you know, been very transactional, very deterministic in terms of how it works. We have to change how we go about the implementation that be more methodology driven. So we have to look at the methodology first, incorporate the process and the methodology, look at that, and then incorporate the AI and the technology into that methodology and process. Whereas traditionally with technology, what features are we going to implement? What, you know, what are the tools we're going to implement? And then we try and maybe shoehorn in some process later on along the way. It's a total shift. It's a total shift of 180 degrees. I don't think SAS is going away. You hear? Oh, SAS is going away. I don't think SAS is going away, but I know SAS will be very much. It'll be very different in how we go about the implementation of SAS through this methodology and process centric.

Yeah.

Well, Marissa, just our friend and customer, it's great to see you. She made a great comment, right. She's quoting Jensen Huang from, from Nvidia, right. Who said very clearly, he says, AI won't take your job. Someone who uses AI will take your job. And it's pretty much the same place if you look at it from your business, right? AI won't. AI won't control or put you out of business. Your competitor using AI better than you will put you at risk.

All right, where's next?

Yeah, let's kind of jump into our E Commerce and marketing segment. I want to just mention these articles, Tom, and then I want to jump ahead to our technology segment section. We've been talking a lot about already. Right. This is an article from marketingprofs.com AI belongs in your marketing toolkit. That saves space for humanity too. And that just is a nice article that kind of ties the, you know, look, this is an augmenting people in most of the businesses that we're talking about today. There's a human side of this that goes with the organization as well. There's another article there about key drivers for brand reputation. Again, this being our marketing e commerce segment. And so really two articles about driving brand. But I think, Tom, why don't we jump into our AI and technology segment so we really kind of bring all of the things that we've been talking about today. There's maybe let's do this if you guys don't mind. So our articles in this segment are about power to drive AI and then we're going to talk about Johnson and Johnson strategy. And those are the two that I'd like to talk about in this segment if you guys are okay with it. Why don't we. Since we've already been talking about what businesses are doing, let's talk about this article with Johnson and Johnson first. It talks about them pivoting its AI strategy, which is really what we started our discussion about today. And we were even talking about before we went live today was moving from that place of I've got, I'm going to, I'm going to a bunch of events about AI. You know, the, the banner says AI so hence I'm going to fly into the city and I'm in a. What first time I met you, Brooks, right, was you were, you were there speaking about AI and in Chicago and with DSG's first event and, and, and those are important events. But there is a place where rubber meets the road and we stop talking about things and start doing it. So why don't we talk a little bit about what Johnson and Johnson's doing here?

Well, I think it pretty much sums up what we just been talking about. Right. I think they went out, it sounds like from what the article talks about is they went out fast and furious. Hey, we're going to put AI throughout the organization and kind of a little bit of a spray and pray on the whole thing. And maybe it didn't quite work out the way that they were expecting. And they probably had some, probably some issues with security and guardrails as you mentioned. And then they said, okay, now we got to pull back and redo it. I think the positive, they probably learned a lot from that.

Right.

So maybe it wasn't so bad that they Went out and did the spray and pray and whatever. And then they're. Now they've learned a lot because now they could see and make some decisions on it. But.

But they're executing finally, but they're executing.

My guess is, I mean, I don't know Johnson Johnson, a huge company, but do they really have a plan or do they. Are they continuing to just say, okay, well we tested 500 things and 20 things worked and kind of the 8020 rule and we're going to remove the.

Well, the article actually says that. Right. It says that the company explored nearly 900 gen AI use cases but found that only 10 to 15% delivered 80% of the value. So they decentralized its AI government, empowering individual departments like commercial supply chain and research to manage AI initiatives more effectively themselves. And the first place they started was they called it a rep co pilot to assist sales representatives engaging healthcare professionals. And they're using that piece right now in a pilot program. So there was a key component or quote from this article that I liked. It said the strategic pivot aims to allocate resources to initiative with clear business outcomes while eliminated redundant and ineffective projects. So I think they've. And they just said right in this article 10 to 15% of 900 gen use cases that they evaluated brought value. So I think they did the work. Right.

I liked three things about this. One was somebody CIO CEO said go do AI stuff and we're not going to punish you for it. Second was there was a lot of creativity out in the organization, a lot of pilots. When it happened there was a lot of discovery and as with any learning process, a lot of failure. But they did it, they made the investment. And then now the third thing I really like is they have a framework and model of how are we going to determine what is valuable rather than just cool or nifty. And they are putting serious wood behind that. So now they're going to be in a position where they have figured out what works, what doesn't. Have a lot of people in their organization who have opinions and intuition about what will and won't work and why. And then now they're going to potentially be able to motor ahead of their competitors via that investment in the things that do matter.

Yeah. So Brooks with is that when you consult with companies, is that kind of the strategy and best practice that you tend to recommend? I mean if you were consulting with them, would you give them an A plus or what would you give them as a grade? Obviously it's hard to know Everything but.

The to me, the portion that gets the A plus is to mobilize the people who are creative and forward thinking to go do stuff like get these people unlocked. Every organization has them. So that to me is the A plus. Love that they run pilots. The way that we would approach it more is like, hey, figure out what works. Like get all the execs on the same page. Then figure out what works in the organization from an ROI standpoint, which is usually what we come in with, perspective on it. And then the other portion is how do you begin unlocking the organization by not making it totally top down. So it's usually like, hey, go, go work with supply chain pricing hr. Tell them the common things to go do even if they're just using Copilot or chatgpt and see what begins to start coming up in the organization and then make sure that those pilots align with the value structure of the organization. To me, groups that come in and say, hey, I have an idea, I'm going to cut half of my staff in. In an area. And I'm like, why are you thinking that is a good idea in an employee owned organization?

Because the board asked me about it.

Yeah. Or can ask about it and then be asking questions later on about why.

What happened?

Survey results back that everybody's terrified of AI and all of the initiatives have ground to a halt because in an employee owned organization where fam, you know, company is family, nobody wants to upset family.

No. Great, great point. So side with that. The, the next article down, we'll just hit it really quickly about HR. Dive published a study about 6 out of 10 workers admit making AI fueled errors.

Right.

And so that kind of ties back what we were talking about earlier about hey, you know, we flipped the switch as an IT director that let's go ahead and let Copilot go loose in the organization and Copilot starts showing up into spreadsheets and there's some agents that are available Pre built from it. So this was talking about the fact that 57% of employees admit to making mistakes at work due to AI errors. Further, about half use AI without knowing if it's permitted and 44% knowingly use it improperly. And then this was the kicker for me. 46% have uploaded sensitive company data to public AI platforms.

Right.

So there's risk out there. Right. Goes back to the discussion about having a plan for what we want to do with it.

Yeah, I think there's, you know, this part about loading sensitive data. Right. Certainly it's not a practice you want to do. But what people don't realize is it's not like if I take a document of my best practices, it's going to go word for word into the model and be regurgitated back. If you know, the way the models work and the way that they have the relationship of the tokens and the words. I'm not saying it couldn't influence, but it's not going to regurgitate back your key intellectual property along the way. So. But I do think going what this kind of what you said, Brooks, is 57 of employees have made mistakes. Okay. Maybe that's what we want them to do. Right. As part of that process. Let them make the mistakes, let them learn from the mistakes and you know, learn that always, you know, they have hallucinations or the accuracy of what you get back isn't always 100 correct. Right. And get familiar with those things.

Yeah. One of my, my favorite ones was like small organization CEO had a prize every week. It was nominal, like bring me the best AI example from your teams. Probably all those numbers are low if they're. But yeah, I think this is pointing to have a plan and communicate.

Yeah. Right. Well, and, and I think, you know, if you were to do that, right. Kick it off with some training big time, pretty straightforward. Right. We do this, we don't do this. And you know, I like the idea of go, you know, fail fast is, is great, but fail fast with some guardrails about what we should be doing with this. Right.

And fast and share with everybody.

Yeah, right. Great, great point, Tom. Exactly right.

Share it, share it, share it.

Yeah. And, and, and then also understand what outcomes that we have then. Tom, you made the good point earlier about, you know, hallucinations is okay. Did we come back with something that's really good now? Let's maybe if before we implement it within a department or whatever, let's spot check our results and really understand it deeply versus you know, just getting something cool and trying to, trying to implement something pretty quickly. So I think it's, it all ties back to what we've been talking about the entire show today is having a plan, understanding the values and the benefits and then putting some systems and guardrails in place will be helpful. So I, I want to in some time that we have today though, Tom, can we shift back to that first article that was there though? This is pretty powerful. So this was from Yahoo News, but it was all over YouTube, it was all over CNBC, everywhere else. The former Google CEO Eric Schmidt testifying in front of Congress, talked about future demands of AI on our energy grid, so to speak. So why don't we talk about that a little bit? Because, you know, Brooks, the same event that, that I met you at the first time, this was addressed in the, the opening keynote with Zach Cass, who was early in the business, the front end of the business side of open AI before he went out on his own. And I don't know if you know him well or stay in touch with him, but he really spoke to this and, and I'm guessing, Brooks, you have a lot to say on this, but we can't get in. And I think he was relating it. I assume you probably heard the same keynote at that event, Brooks. But you know, I think we were, he was talking about, right, the capabilities of AI and let's just use solving cancer. Right. It's almost my takeaway from that. It's is, you know, because sometimes people will throw their arms up and go, well, there's, there's, you know, come on, that's, we haven't been able to solve cancer yet. But then if you stop and think about what AI does, learning from itself and learning and learning and learning and learning, it says, well, if we've got all of the research data going into the same database and we every day are loading new patient outcomes in because Mr. Smith had a reaction to this drug or whatever it might be, how could we not. Right. Solve cancer? Right. If you start thinking about the computing capabilities and the learning capabilities, it's almost how could we not solve these issues? That being the case was in what Zach brought up in that setting was, but by the way, we don't have the power to support the computing that's needed to solve cancer. Right. So big issues right now behind how do we support all of this. He was talking about fusion and other different things. So I'm going to throw this back out to you guys on your takeaway from this.

I first off, I do think there's going to be a bit of a bifurcation of the economy into a new segment, which is the parts of the economy that execute the fair care and feeding of AI systems in general. So data centers and power generation and distribution, if you're in those markets, that is a wonderful pricing power spot to be when you have people on the other side who have a couple trillion dollars and want to spend it fast. I do think that we'll see higher energy prices creep up over the next, we'll see this in two years time. But this is also a substantial enough item that it becomes part of the geopolitical calculus. So great to have really smart models, but if you have smart models and you can't run them, that's an issue. And if the key to commercial success and military success becomes being able to run these models more and faster and energy is the main limiter, then I think we're going to see some moves in the next couple of years to figure out how to unlock it. Which might mean renewable, non renewable. It also might mean pushing northward and forming relationships with Canadian organizations who are in a good spot to build out a lot of hydroelectric power and potentially geothermal power. So if you're a distributor in that area, that might also be an opportunity.

I love that. So I think my takeaway from this whole thing is the geopolitical factor. Right. Is we're busy talking about previous administration, everything electric, we don't have the grid for it. Right. Wanting to build out current administration, not so much. But then we look back. In my hand scribbled notes from the recap worksheet that I have for the show today. Is China right? Is they are doing every single type of energy. Right. Hydroelectric, geothermal, standard grid, coal, solar. Solar, exactly. And nuclear. Right. Pulling all those things together. And where's the risk of who's right nipping at the US Heels in AI There they are and doing everything they can to be able to be able to. To power their resources that they knew needed use these models for. And I'm not suggesting that, you know for a second that there's not environmental factors and all the things that go with that that need to be evaluated. But what Mr. Schmidt is saying here is that, you know, AI could eventually consume 99% of global electricity. And his whole point was the urgency that the US Accelerate the production. He just said his quote was, what we need from all of you talking to Congress was the energy in all forms, renewable, non renewable or whatever. It's like bring everything, be thinking about it all and don't be thinking about what's best for your state or your constituents. Is what do we do to power the electrical needs to stay a superpower? Because it ties back into the geopolitical things. There's still an arms race at some level. Right. And the, the leader in AI is going to be the leader in the battlefield as well.

Yep. So if I, you know, take us to what do I do about it? If I'm a distributor, I would love to figure out how do I sell into data center construction and maintenance, how do I sell into power distribution and generation, what are service packages, product packages, maybe even have a part of my organization that that's all they focus on is how do I go do this more quickly, how do I make sure that I have the right offerings and packages and product knowledge? Because there are just going to be loads, literally trillions of dollars of investment in this area.

Yeah. And the look, I couldn't agree more with what Eric Schmidt said. If you look at, you know, when Deep Seat came out from China. Oh, it's a more optimized model. Oh, and we are going to have more optimized models.

Sure.

But that's not going to reduce the use of power. It's going to increase the use of power because when you optimize something, people use it for more things.

Great point.

It becomes way less expensive to use. So you use more of it.

Yes.

Right. If I could get gasoline in my car for 99 cents, I'm going to drive more potentially than if it's $5 a gallon. Right. So it's a huge issue. And you know, Bob brought up here micro, a modular micro nuclear power. Right. There's so many, there's, there's so much you talk about education, there's so much miseducation. Like these micro, micro nuclear power facilities, they literally, they cannot melt down, they cannot turn into a, to a Three Mile Island.

Three Mile island is, is a movie.

Right. And you can literally have them anywhere without fear of having them in your backyard right along the way. So I think that, and maybe this was Eric's point with Congress is we want to talk about deregulation. We want to talk about putting manufacturing back on shore and all that stuff. Well, this should maybe even be a more important point as to how do we build out our power infrastructure and our energy infrastructure because, and you keep hearing, oh, well, we don't, you know, we're going to have fewer power. The data centers aren't going to be built. We don't need the chips, we don't need, need the, the, you know, the GPUs anymore or whatever. I don't think that's going to be the situation for, for, for a while, so. Completely agree.

Yeah, that's great. Well, it's, that's something we should probably be paying a little more attention to so we can move forward with that. There's a jumping into our sales and M and A section. There's a nice article from, is published in Industrial Supply Trends, which is then the latest publication that David Gordon and John Gunderson are doing. So they've got their electrical trends and H VAC trends and so forth. But I enjoyed what John wrote about why is B2B distribution like making orange juice? Did you guys get a chance to look at that one?

Yeah, I thought it was funny.

Yeah. In knowing John a little bit. I got to spend some one on one time with John early last month at the Industrial Supply association meeting. He's just a funny guy. But I just wanted to kind of hit these points. Right. He's drew the analogy between B2B distribution and the process of making orange juice to illustrate strategies for growth and profitability. And he says grow bigger oranges, focus on acquiring, expanding relationships with larger customers. Squeeze more juice and haps operational efficiency through better pricing, rebates and procurement. I would suggest that there's all kinds of ways, additional ways to squeeze more juice out of it through some, you know, service levels and full line selling and so forth. Grow more oranges, seek new customers, enter new channels. Buy someone else's orchards, pursue acquisitions to expand market share. Build an orchard in another town, expanded in new markets and invest in your processing plant. Improve processes and facilities. So that was just a great analogy of some good tools to use and.

Use AI to come up with different variants. Use some flavors, you know.

That's right, that's right.

Pineapple, whatever, whatever it may be, it.

It might come up and suggest that if you add vodka, it can solve some problems too.

Turn it into a Mai tai, a little, little orange juice, little rum, you know.

Perfect. Very good. All right. As we go through that segment we've talked, in fact we had a really good. We probably should have recorded our pre, pre show discussion because we were talking about funds entering the space. So let's just talk for a couple minutes here. So things are solidified with the big acquisition by QXO of Beacon Roofing. Eleven billion dollar deal. But now the discussion is how do you take that company to a 50 billion dollar your enterprise? I think if you were to take a look back at United Rentals and a few other of Brad Jacobs that leads the show there of his endeavors, you would not be somebody to bet against. And what he is talking about here is a completely technology centered organization and wanting to do that in a lot of other organizations so that we have next to have an article in there. And I love to do is chat for the last few minutes we have today guys about these two last articles about what QXO and other private equity groups are looking to do. And then Applico Capital has a new investment tool or strategy that they want to bring to help distributors get more involved in AI so why don't we kind of bundle those together for a broader discussion.

I I'll go firstly something I I think this is going to be one of the more transformative events within distribution. I say may we'll see what happens in in terms of actual execution on this. But that is a big money that with a bold plan. And I also don't doubt that there will be other entrants that look like this coming out of like for example, there's a large fund in the Bay area known as a 16Z Andreessen Horowitz they're running, raising a $20 billion fund and this is going to be part of that strategy is buying mature companies in order to flip out the processes. So, you know, we'll see how this evolves. But I think this is going to be enormously impactful and something to watch.

Are the Go ahead. Tom.

No, I was just going to on the Silicon Valley funds that you mentioned, are they creating more of a PE type fund where they're doing a buyout or it's not the traditional investing in the ABC series, ABC sort of scenario. It's more of hey, we want to take an ownership position. Is that you're seeing that from the Silicon Valley groups that.

That's right. I, I think part of their plan is to invest in the tools and technologies and then they have or what I've seen kind of the first time quite some time is a hybrid model in some of these funds to go buy companies, then equip them with those tools and and move on.

Which is kind of what the Applico Capital model is, I believe, leaning towards that we have here. Well, maybe not because they're not looking.

To take a no, they're not looking to take it take a they're going to take a minority spot in that setting with what Applico is looking at doing. But you know, one of the things we didn't talk about is and I'm appreciative of you bringing up some of these other funds looking in this setting is what we don't know is who are the limited partners in QXO's fund. Right. With the amount of money that they've got of dry powder, so to speak, there could be some other funds that are plugged into that as well to maybe see how this goes and either pump more money into the QXO model or go build their own as well. So I think one of the challenges though that's coming With So you know, what Applico is looking at doing here is taking a minority investment in distribution companies to help them leverage leverage AI and part of that would be obviously, you know, as we were talking about earlier today, is bringing Applicos portfolio companies in. Right. Which is a. Some people may love that idea, some people may question that idea, but I think the challenge that happens in that particular model potentially is, you know, is was talked about here is, you know, some of the big backers are limited partners which you know, for those of you that you know, don't watch closely whether it's a private equity organization or a venture capital firm, is that money isn't typically just one person's money. It is a large group of limited partners who pooled the money together to fund the thesis behind what they're going to go invest in. Well, in this particular case you have companies like MSC Industrial, Sonepower, Wesco that are limited partners in that fund. Now I'm going to say something that I don't suggest for one second I believe is a relevant concern. But what I hear talking to people about this all the time and a good example would be when Bunzl, the large British distributor started buying manufacturing companies, there was a lot of distributors that had a lot of heartache and headache about that and said well I'm going to move my business away from those manufacturers because now they're, they're owned by a big distributor to compete with me. That's not the model. Right. And I think just the same play way here, right. MSC Industrial, Sonepar and Wesco are not putting money into Applico's fund to see what they can capture from, you know, customer data or what relevant data. Right. There's huge firewalls in between all of that for them. But there are a lot of people out there that have that mindset that I'm not going to do that because I lost XYZ account to a Sonarpar owned company or Wesco took this piece of business away from me or I don't have the cutting tool business at this plant anymore because of MSC Industrial. There is that mindset out there that will leverage into some people in that setting.

So you don't think that the mindset is that they don't, they will not like the model is what you're saying?

Yeah, I think there is, there's risk for people that this could be potentially beneficial to that wouldn't want to be involved with it because of the, where the money's coming from. Right. I think it's I mean, it's, I'm not suggesting for one reason from one moment that it's a reasonable comment. I just, I'll use that Bunzl example.

Emotional element to it. Right.

I heard the Bunzl example. Over the course of the last six or eight years, as they've been buying small manual, smaller manufacturing companies over and over, over again for distributors, they're like, well, I need to move my business away from there because, you know, who knows when they force them to, you know, share all their customer data.

So anyway, so as we kind of wrap up in the final word, do you think it'll work? I mean, do you think this is going to be a, a playbook that's going to work for, for, for all parties?

I, I think that this is a play that can only be run a couple of times.

Okay, unpack that a little bit, would you?

And part of this is I do feel like there's an opportunity of small smart money and coming from distribution, helping other distributors develop the tools that are necessary in order for them to thrive. I could see a lot of west coast funds looking at the current set of tools and saying like, I don't really know. This is our thing. So we're going to go invest in Finserve advertising, media tech. Sexy. Don't care about manufacturing and distribution. Whereas I think some of these other companies are like, no, no, no, we're important and we deserve the same set of high quality tools. And so we're going to try to change the landscape that way. In that way. I see that it's good, but certainly we've heard a number of times like, no way are you hosting me on aws. Don't give those rats a single cent.

Yeah, Tom, any other thoughts on that as we wind down?

I'm actually really intrigued. I want to do a little more research on this. Just what you were talking about, some of the Silicon Valley investors, you know, I'm, I'm very interested to see. I don't know enough yet to make some good comments, but it's interesting to see that this is finally maybe encroaching into the industry where we certainly haven't seen that up to this point.

Well, and I, I really think actually being a Southern California person and where I'm at here in Orange county, there's a big tech scene. Spend some time as you do, Tom, in Silicon Valley. We know a lot of people there. When I sit down and talk about what we do in the market that we serve, people get glass, you know, Starry eyed and glass or glassy eyed I should say, like they just don't get it. Now when you stop and think about that 75 cents out of every dollar globally goes through distribution. Right. But people cannot get their head around it because it's, I'm not talking about when I might be at a SaaS executive conference as a simple example is I'm not talking about a sexy fintech solution that lives in the cloud. Right. We're talking about real people that get up in the morning, they put a pair of boots on and they go to a construction site to make sure that the pipe salves and fittings or the electrical wire got there correctly. The fact that that's what drives the world a lot of them can't get their head around. So your comment Brooks, about the, the issue related to maybe this, maybe the, the Silicon Valley folks or the west coast folks don't see the, the value in this, but there's a whole lot of other money out there in the rest of the world that that does.

Yeah.

So that's good.

Silicon Valley all the way.

But, but that's I think a little different. Tom and Brooks, I want you to. I'm glad you said that, Tom. So let's make the differentiator here. Brooks, if I understood you correctly, and it's this ties into our original discussion before we even went live today was quite a bit of what these groups are talking about and you had shared even an email with us earlier about General Catalyst and some of these companies not necessarily coming to distribution but coming to, I think you used the word print shop or maybe the florist or some more brick and mortar type, even retail type businesses. That's probably where the Andreessen Horowitzes of the world correct me if I'm wrong, Brooks, but I think that's what they're looking at versus distribution.

Right now. If we look at their capital outlays, they're not big and they don't make up a very large percentage of the total cash they have to deploy. These look to observers like they're practicing and I will be interesting to see in the next few years where they decide to deploy that capital elsewhere in the economy with the same model.

Yeah. And they're running out of places to deploy capital. Right. Especially maybe significant amounts of capital. So it's if you look at a lot of startups now, startups require less capital. You don't need these big huge rounds that you had before. So if I'm a capital deployment, you know, and especially A large fund. I got to look at some creative ways and you know, an intelligent person looks at this market and goes, man, this is an underserved market with a lot of opportunity. I don't know.

I think if you look at distribution in general, it's like there's a ton of data, there's process consistency and there's low vendor turnover. I think outside organizations that are data heavy and can make take advantage of things like AI are going to look at distribution and say, actually this is a really good fit for everything that's outside of the warehouse. And once robotics come along a little bit further, probably the next 18 months that will also change. Yeah.

And I'll add one other factor which you just said to that Brooks, is the other part of it is there's an amazing amount of tribal knowledge versus just the raw data that's in the business and capturing the raw data in the business and the tribal knowledge to go just in an AI example, to train internal company models. You start putting all of that together and it becomes very powerful. So anyways, I'm looking at the time and saying we could be four hours from now still having this chat about these things, but we're going to skip through our, our people and leadership segment. We're going to skip through our scuttlebutt section because we've gone quite long today. But Brooks, man, thank you for being with us. Tom, maybe you can pop full screen for us. It's awesome. Brooks, any closing thoughts on the discussion today?

One is a ton of fun. The one of the big pieces of recommendations I have look at your largest competitors, do a quick search to see what percentage of their goods are coming from Asia and plan accordingly.

Great, great recap. Before we go and and wrap up, Brooks, your company's name, how do people get in touch with you? They want to get some of your insights. How would they, how would they go about that?

Thank you. AI Strategy Advisors or also Hamilton AI Strategy Advisors. Either one of those work.

That's great. You're prolific on LinkedIn as well. If people aren't connected with you or following your company there, maybe check that out. Speaking engagements coming up. Anything in particular that you'd want to share? Try and get you a little plug in for giving us an hour and a half of your day.

I appreciate we're going to be there at the AI conference in Chicago with Distribution Strategy Group.

Fantastic. Good. See you there. That's good. That's the big next one coming up. That's in June. So if you're looking for a place to get where lots of insights are going to be available for AI in general. The distribution strategy group, that's just distributionstrategygroup.com has there. This will be the third, I believe AI centric or AI and distribution event. It'll be a good event as always. So I will see you there and we'll look forward to that one. So appreciate the comments of everybody that came in today. Tom, as always, I appreciate you closing out as we always do. We thank everybody for being with us. We'll ask you one more time, hit that subscribe button, the follow button and that way we can get this message out to a larger audience and certainly make those algorithms kick in for us. If you're listening in on the recorded podcast version, Apple, Spotify, Odyssey, wherever it might be, you didn't get to see the newsletter that we have today. If you would like to get that newsletter and you don't simple way to get that, you can send us an email@helloadsmartech.com look up around the Horn in wholesale distribution and manufacturing on LinkedIn and you can request the newsletter there. It'll come through through LinkedIn or we have a website for the podcast www.aroundthehornpod.com and get it all there. Last little plug Lead Smart Technologies, developers of the Channel Cloud, AI enabled CRM and Customer Intelligence solution. If you're interested in bringing silo data from around your business into a single platform to help you visualize and understand better what's happening with your customer, with your teams and your overall business in one single place, we would love to have a conversation with you and tell you how we can help you on your digital transformation journey. That's it guys. Have a fantastic weekend. I'm headed late today to the boat show up in Newport beach to look at boats I can't afford and I'm going to get out on the water and do some yacht racing tomorrow. I'm going to do some sailing that I've not done in a few months. So looking forward to the weekend.

Sounds good. Thanks Brooks, really appreciate it.

Thanks again Brooks.

Comments Everybody have a good weekend?

Yep, fun time.

Thank you all.